ISLAMABAD, Pakistan — A nearly completed U.S. military study is expected to say that nuclear-armed Pakistan, not Iraq, Afghanistan or Iran, is the most urgent foreign policy challenge facing President Barack Obama.

Pakistan, convulsed by a growing al Qaida-backed insurgency, hamstrung by a ruinous economy and run by an unpopular government that's paralyzed by infighting and indecision, is critical to U.S. efforts to stabilize Afghanistan, thwart the spread of nuclear weapons and prevent tensions with neighboring India from escalating into a nuclear showdown.

The U.S. Central Command review is assessing the situation in the Middle East and South Asia as the Obama administration plans to draw down U.S. forces in Iraq and double the 30,000-strong American military presence in Afghanistan, several people involved in the study told McClatchy. They spoke on condition of anonymity because the study is still underway and they weren't authorized to discuss it publicly.

The assessment, they said, is expected to recommend major changes in the U.S. approach to the volatile region, including major increases in U.S. aid to Pakistan in areas such as public education, health care and good governance, in a bid to stem the poverty and illiteracy that help fuel the country's Islamic insurgency.

Stepped up non-military aid also could ease popular anger at the government and its chief ally, the United States, which many Pakistanis accuse of stoking the insurgency by relying primarily on military offensives and missile strikes that have claimed numerous civilian lives, the officials said.

Such recommendations are consistent with an administration plan championed by Vice President Joseph Biden to give Pakistan $15 billion in non-military aid over the next 10 years. Since the 9/11 attacks, the U.S. has given Pakistan more than $7 billion in military assistance and just over $3 billion in non-military aid.

The administration's plan would condition new military assistance on the Pakistani Army's cooperation in curbing the insurgency and eliminating the refuges in the remote Afghan border region that the Taliban use to attack U.S.-led forces in Afghanistan and al Qaida uses to train terrorists and plot new strikes on U.S. and other Western targets.

However, crafting a new U.S. policy on Pakistan is likely to be a daunting task for Obama and his special envoy, Richard Holbrooke, who's to make his first visit to the region next week.

"This will be a major policy challenge," warned Paul Pillar, a professor at Georgetown University in Washington who served as the top U.S. intelligence analyst on the region. "The situation is in flux."

Pakistan is slipping deeper by the day into political, economic, ethnic and religious chaos.

The Pakistani Taliban control most of the tribal areas bordering Afghanistan and have seized Swat, a valley 100 miles from Islamabad. Electricity and food shortages have sparked unrest and stalled industrial production, and the stock market has dropped more than 60 percent while the Pakistani rupee has fallen 30 percent against the dollar in the last year.

Meanwhile, the coalition government led by President Asif Ali Zardari, mired in infighting and incompetence, has failed to unite around a strategy to contain the crisis, and some U.S. and Pakistani experts warn that there's a growing danger that Pakistan could have its fifth military coup since it won its independence from Britain in 1947.

"The civilian leadership is weak and fearful of the inevitable in Pakistan, that it oversteps the mark and runs the risk of being removed (by the Army)," said Rashed Rahman, a political analyst based in Lahore. "It is a non-functional government. There is no legislative program. Parliament was always a talking shop in Pakistan, but they have taken it to new heights."

The coalition is led by the Pakistan People's Party of Zardari's slain wife, former prime minister Benazir Bhutto, and comprises 70 ministers ranging from the secular to reputed Taliban sympathizers.

A State Department official said in Washington that the Army chief of staff, Gen. Ashfaq Kayani, supports democratic rule and doesn't want to burden his troops with running the country when its main task is fighting the insurgency.

However, he said, U.S. officials worry about senior and middle-level Army and intelligence officers who consider India and the United States Pakistan's main foes. These officers think their best response is continuing to back the militant Islamist groups that Pakistan's powerful spy agency, the Inter-Services Intelligence Directorate, or ISI, created to wage proxy guerrilla wars in Afghanistan and Indian-held Kashmir.

"The frightening scenario is that officers in the Army find allies in the ISI (who) see the need to go back to a policy of keeping India and other enemies off-balance," said the U.S. official, who requested anonymity because of the sensitivity of the issue.

That policy, however, also spawned the Islamic extremist groups that seek to replace the government with a Taliban-style Islamic regime.

At least 2,267 people were killed and 4,558 injured in at least 2,148 terrorist attacks in 2008, according to the Pakistan Institute for Peace Studies, an independent research organization based in Islamabad. Taliban are entrenched around Peshawar, the capital of the North West Frontier Province.

The violence seems to be mounting by the week. On Thursday, the bombing of a Shiite Muslim religious procession — the Taliban and al Qaida belong to the majority Sunni sect of Islam — in Punjab province claimed at least 27 lives.

There's little doubt about Zardari's commitment to fighting terrorism, which claimed the life of his late wife in 2007. Speaking in Peshawar on Friday, he pledged to "finish off this cancer or it will dictate to us."

The ruling coalition, however, is split between those who favor a military approach and others, including some Taliban sympathizers, who advocate negotiations.

As a result, civilian leaders have given the Army no clear direction, while politicians complain that they're shut out of key decisions by the military. The Army, meanwhile, privately complains that the civilian leaders have no political or even police counter-terror strategy.

"The civilian government just doesn't have enough capacity, especially in security issues," said a retired general with experience dealing with the government, who declined to be identified because of the sensitivity of the subject. "When there's a vacuum like that, it has to be filled, and who else is there but the Army?"

Worse, many in Pakistan, including some members of Parliament, question the Army's commitment to fighting the extremists.

Following the Mumbai terrorist attacks in November, which were blamed on a Pakistani extremist group, Lt. Gen. Ahmed Shuja Pasha, the ISI chief, described Pakistani Taliban leaders as "patriotic" Pakistanis in a private briefing to some journalists, according to several who were present.

"There is this notion that the Taliban can be an ally," said Hasan Askari Rizvi, the author of 'Military, State and Society in Pakistan'. "It's a question of Pakistan's identity: Was it created for Islam? This kind of confusion is a threat to Pakistan's existence as a nation state."

The Army insists that after 9/11 it abandoned a policy under which it openly patronized the Afghan Taliban and Pakistan-based jihadist groups.

"Senior military and ISI figures get it, but there are problems when you get further down the ranks," said a Western diplomat, who couldn't be identified, as he wasn't authorized to speak publicly. "I don't know how you would get tougher with Pakistan. By cutting Pakistan off, we'd be hurting our own interests."

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